JACK(SH:603337)2025-05-18 15:48Summary of Jack Co. Conference Call Company Overview - Jack Co. is transitioning from a cyclical to a growth-oriented business model, with new products driving this change. The upcoming high-end AI sewing machine, set to launch in September 2025, is expected to enter the high-end garment sewing market, potentially doubling the average selling price (ASP) and securing performance for the next 2-3 years [2][3][5]. Key Points Industry and Market Dynamics - The industrial sewing machine industry is currently at a historical percentile of around 40%, with demand fluctuations between 6 million and 8.4 million units over the past two years. Even in the worst-case scenario, a 10% decline in demand is expected, while a 20% increase is possible in optimistic conditions, indicating limited overall market space [4]. - The impact of cyclical fluctuations on Jack Co. is diminishing due to an increase in overseas market share, which has reduced volatility. Export sales now exceed domestic sales by more than double, making new products and profit margins more significant drivers of stock price [2][4]. Product Innovations - The high-end AI sewing machine launching in September 2025 is anticipated to significantly enhance the company's ASP and provide performance assurance for the next 2-3 years. The company is also set to release robot-related products in 2026, aimed at automating garment manufacturing, which is expected to yield substantial long-term growth potential [2][3][5]. - The AI sewing machine is designed to guide operations through visual AI, reducing training costs and enabling oil-free sewing, which could challenge high-end competitors like JUKI. If sales reach 70,000 units in 2026, it could increase the company's earnings per share (EPS) by approximately 10% [2][7]. Financial Performance - Jack Co. achieved a profit growth rate of 50% in 2024, with a net profit margin reaching a historical high of 13.4%. The net profit margin continued to improve in Q1 2025, with expectations of exceeding 20% in the future [2][3][5]. - The gross margin for sewing machines has improved from 30% to 50%, primarily due to a doubling of prices without significant cost increases. This improvement is attributed to a favorable competitive landscape and successful product iterations [6]. Automation and AI Integration - The garment manufacturing industry is well-suited for AI and humanoid robot technology due to its large workforce and relatively low precision requirements. The domestic workforce in sewing is approximately 15 million, with a global total of around 80 million, leading to significant potential for automation [8][9]. - Jack Co. is implementing a two-step strategy for automation: first, utilizing existing automated products to achieve partial process intelligence; second, developing humanoid robots to address material handling issues. Initial prototypes have demonstrated a 98% accuracy rate in material handling [10][12]. Challenges and Future Outlook - The garment manufacturing sector faces challenges in adopting industrial robots, particularly with flexible materials and the diverse range of SKUs. AI technology must reach a certain level of maturity to effectively replace manual labor [11]. - Jack Co. anticipates that if humanoid robots achieve high penetration over the next 30 years, the business could add between 10 to 20 billion in market value, indicating significant growth potential as new products are launched [14].